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OCR unchanged at 2.5 percent

The Reserve Bank today left the
Official Cash Rate (OCR) unchanged at 2.5 percent.

Reserve Bank Governor Alan Bollard said: “Inflation is restrained and
is expected to stay near the middle of the Bank’s target range.

“The domestic economy is showing signs of recovery. Housing market
activity continues to increase and a recovery in building activity appears to be
underway, as forecast. That recovery will strengthen as repairs and
reconstruction in Canterbury pick up later in the year.

“However, the global outlook remains of concern. Near-term indicators
have moderated and financial market sentiment is still fragile.

“The New Zealand dollar has stayed elevated despite recent falls in
commodity prices. Should the exchange rate remain strong without anything else
changing, the Bank would need to reassess the outlook for monetary policy
settings.

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